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Consider Language to Ensure Fabrication Compliance with Wage Equalization Requirements and Indemnification

Dec 05, 2019

Purchase Orders -838108244-600x441During a recent meeting with SMART to discuss industry wage equalization requirements and issues, SMACNA’s Labor Committee noted that contractors in some areas have incorporated language in their purchase orders that advises fabricating contractors that certain items in their order may be subject to wage equalization requirements, and that it is the fabricating contractor’s responsibility to ensure such requirements are followed and to indemnify the purchasing contractor from any claims made against them relating to wage equalization.

Most, if not all, industry bargaining agreements have wage equalization language similar to Article II, Section 2 of the Standard Form of Union Agreement (SFUA).  That provision provides:

“Subject to other applicable provisions of this Agreement (SFUA), the Employer agrees that when subcontracting for prefabrication of materials covered herein, such prefabrication shall be subcontracted to fabricators who pay their employees engaged in such fabrication not less than the prevailing wage for comparable sheet metal fabrication as established under provisions of this agreement.”

Enforcement of wage equalization provisions was an issue that garnered the attention of SMART and its affiliated Local Unions a few years back.  While only several related grievances have risen to the Panel or NJAB stages of the grievance procedure in the past several years, SMACNA and SMART noted one way that contractors could insulate themselves from grievances when subcontracting for prefabrication was to include language in their purchase orders requiring fabricators to assume the wage equalization obligations and to agree to indemnify them should there be any grievances relating to the failure to properly wage equalize. 

SMACNA’s Labor Committee asked that SMACNA provide its members with examples of language that could be included in purchase orders to help avoid wage equalization grievances.  An example of such language is included below.  Contractors may consider including this or similar language in their purchase orders. 

Questions on wage equalization language or requirements should be directed to SMACNA’s Labor Relations Department.

Warranty of Compliance with
Buyers Collective Bargaining Agreement, and Indemnification

Seller acknowledges that Purchaser is bound by a collective bargaining agreement that obligates Purchaser to obtain certain fabricated materials only from those fabricators that pay employees involved in such fabrication not less than the prevailing wage, as defined by the provisions of such collective bargaining agreement.  Seller further acknowledges that it has been furnished a copy of such collective bargaining agreement.  Seller agrees that any materials furnished under this Purchase Order shall be fabricated by employees paid not less than the prevailing wage for sheet metal fabrication, as required by the provisions of such collective bargaining agreement. 

Seller agrees that upon written demand of Purchaser, it will furnish such proof as Purchaser may require, including certified payroll records, establishing that Seller has complied with this requirement.  If Seller fails to provide proof adequate to Purchaser, or, otherwise fails to comply with the requirements of this Section, and as a consequence, Buyer is held liable for non-compliance with the provisions of such collective bargaining agreement, Seller shall indemnify Buyer in full for such liability.  If Seller fails to do so, it shall be liable for all costs of collection incurred by Buyer, including attorneys’ fees.